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The economic benefits and risks of derivative securities

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  • Keith Sill

Abstract

Certain events have raised concern about the risks associated with derivatives trading--witness Orange County, California or Procter & Gamble, both of which lost large sums of money using derivatives. However, the popular discussion often loses track of the benefits derivatives hold for firms, investors, and the economy as a whole. Have derivatives received a bum rap? Keith Sill admits that derivatives have risks, especially to the uninitiated, but they also have a great deal of value for the economy as well

Suggested Citation

  • Keith Sill, 1997. "The economic benefits and risks of derivative securities," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 15-26.
  • Handle: RePEc:fip:fedpbr:y:1997:i:jan:p:15-26
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    File URL: http://www.phil.frb.org/files/br/brjf97ks.pdf
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    References listed on IDEAS

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    1. Grossman, Sanford J, 1988. "An Analysis of the Implications for Stock and Futures Price Volatility of Program Trading and Dynamic Hedging Strategies," The Journal of Business, University of Chicago Press, vol. 61(3), pages 275-298, July.
    2. Detemple, J.B. & Jorion, P., 1989. "Option Listing And Stock Returns," Papers fb-_89-13, Columbia - Graduate School of Business.
    3. Allen, Franklin & Gale, Douglas, 1991. "Arbitrage, Short Sales, and Financial Innovation," Econometrica, Econometric Society, pages 1041-1068.
    4. Stephen A. Ross, 1976. "Options and Efficiency," The Quarterly Journal of Economics, Oxford University Press, vol. 90(1), pages 75-89.
    5. Gregory P. Hopper, 1995. "A primer on currency derivatives," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 3-14.
    6. Anatoli Kuprianov, 1995. "Derivatives debacles: case studies of large losses in derivatives markets," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-39.
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    Cited by:

    1. Frank H. Bezzina & Simon Grima, 2012. "Exploring factors affecting the proper use of derivatives: An empirical study with active users and controllers of derivatives," Managerial Finance, Emerald Group Publishing, vol. 38(3), pages 414-435, March.
    2. Guay, Wayne R., 1999. "The impact of derivatives on firm risk: An empirical examination of new derivative users1," Journal of Accounting and Economics, Elsevier, vol. 26(1-3), pages 319-351, January.

    More about this item

    Keywords

    Derivative securities;

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